New Zealand business confidence hits 17-year low amid tough anti-inflation talk

New Zealand business confidence plunged in November to its lowest level since 1988 as tough talk from the country's central bank and government policy-makers hit company optimism, a survey published Wednesday showed.

The National Bank Business Outlook for November showed a net 66 percent of firms expect general business conditions to deteriorate over the coming year, up from 55 percent recorded in October.

The net figure is the percentage of firms that expect an improvement, minus the percentage of firms that expect a deterioration.

John McDermott, chief economist at ANZ National Bank, said the level of business confidence is the lowest recorded since 1988 when the survey began, just five months after the stock market crash.

"Talk about interest rates increasing until your 'eyes water' and the possibility of ... (central government) controls have caught the attention of the business community and they do not like what they hear," he said in a statement.

The Reserve Bank has raised its anti-inflation rhetoric in recent weeks as it tries to slow consumer spending and reduce persistent strength in the housing market.

The central bank has warned a number of times that it cannot rule out further rate hikes, despite increasing the Official Cash Rate eight times since January 2004 to 7.00 percent in an effort to contain inflation, forecast to hit 3.5 percent next year.

A government decision to seek new ways to curb inflationary pressures, particularly in the housing market, has also come under fire from business this month.

But Finance Minister Michael Cullen said plunging business confidence doesn't mean the country faces an economic crisis.

Cullen said the Reserve Bank and the government had been saying since well before the election that the economic growth rate needed to slow down.

"That hasn't happened as early as we would have liked but this survey, along with other data, suggests we're going to see some slowdown," he told National Radio.

"But we still have the lowest rate of unemployment and the strongest labor market in the developed world. We're not looking at some kind of crisis or some kind of major depression," he said, reported AP. P.T.